10-Q 1 g7866a.txt SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 10-Q [X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended March 31, 2015 [ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 Commission File Number: 000-22855 AMERICAN SOIL TECHNOLOGIES, INC. (Exact name of small business issuer as specified in its charter) Nevada 95-4780218 (State or other jurisdiction of (IRS Employer incorporation or organization) Identification No.) 9018 Balboa Ave. #558, Northridge, CA 91325 (Address of principal executive offices) (818) 899-4686 (Issuer's telephone number) N/A (Former name, former address and former fiscal year, if changed since last report) Check whether the issuer (1) filed all reports required to be filed by Section 13 or 15(d) of the Exchange Act during the past 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes [X] No [ ] Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes [X] No [ ] Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of "large accelerated filer," "accelerated filer" and "smaller reporting company" in Rule 12b-2 of the Exchange Act. Large accelerated filer [ ] Accelerated filer [ ] Non-accelerated filer [ ] Smaller reporting company [X] (Do not check if a smaller reporting company) Indicate by check mark whether the registrant is a shell Company (as defined in Rule 12b-2 of the Exchange Act). Yes [ ] No [X] As of May 19, 2015, the number of shares of common stock issued and outstanding was 68,090,590. Transitional Small Business Disclosure Format (check one): Yes [ ] No [X] INDEX Page Number ------ PART I - FINANCIAL INFORMATION Item 1. Consolidated Financial Statements (Unaudited) 3 Consolidated Balance Sheets - March 31, 2015 and September 30, 2014 3 Consolidated Statements of Operations - For the three and six months ended March 31, 2015 and 2014 4 Consolidated Statements of Cash Flows - For the six months ended March 31, 2015 and 2014 5 Notes to Consolidated Financial Statements 6 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations 9 Item 3. Qualitative and Quantitative Disclosures About Market Risk 11 Item 4. Controls and Procedures 11 Item 4T. Controls and Procedures 11 PART II - OTHER INFORMATION Item 1. Legal Proceedings 11 Item 1A. Risk Factors 12 Item 2. Unregistered Sales of Equity Securities and Use of Proceeds 12 Item 3. Defaults Upon Senior Securities 12 Item 4. Mine Safety Disclosures 12 Item 5. Other Information 12 Item 6. Exhibits 12 SIGNATURES 12 2 PART I - FINANCIAL INFORMATION ITEM 1. CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) AMERICAN SOIL TECHNOLOGIES, INC. CONSOLIDATED BALANCE SHEETS (UNAUDITED)

See accompanying Notes to Consolidated Financial Statements. 3 AMERICAN SOIL TECHNOLOGIES, INC. CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED)

See accompanying Notes to Consolidated Financial Statements. 4 AMERICAN SOIL TECHNOLOGIES, INC. CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)

See accompanying Notes to Consolidated Financial Statement 5 AMERICAN SOIL TECHNOLOGIES, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS MARCH 31, 2015 (UNAUDITED) 1. BUSINESS The Company is primarily engaged in the marketing of polymer and other soil amendments to the agricultural turf and horticulture industries. The Company's products are used to decrease water usage, increase nutrient retention in soil, enhance seed germination and sprout emergence, clarify ponds and increase the effectiveness of chemical fertilizers and biological additives. In 2006, the Company acquired Smart World Organics ("Smart World") and a patent to a slow release fertilizer. The Company also has exclusive license rights to the use of patented polymer application techniques, as well as numerous patents on a unique machine designed to inject polymer and other liquid products into existing turf and some crops. 2. GOING CONCERN AND MANAGEMENT'S PLAN The Company has sustained significant losses and has an accumulated deficit of $29,336,253 and negative working capital of $8,054,513 as of March 31, 2015. The ability of the Company to continue as a going concern is dependent upon obtaining additional capital and financing, and ultimately generating positive cash flows from operations. Management intends to seek additional capital either through debt or equity offerings. Due to the Company's current financial condition, management cannot be assured there will be adequate capital available when needed and on acceptable terms. These factors raise substantial doubt about the Company's ability to continue as a going concern. The consolidated financial statements do not include any adjustments relating to the recoverability and classification of asset carrying amounts or the amount and classification of liabilities that might result should the Company be unable to continue as a going concern. 3 BASIS OF PRESENTATION AND SIGNIFICANT ACCOUNTING POLICIES BASIS OF PRESENTATION The consolidated financial statements of the Company are unaudited and have been prepared in accordance with accounting principles generally accepted in the United States of America for interim financial information, pursuant to the rules and regulations of the Securities and Exchange Commission. Notes to the consolidated financial statements which would substantially duplicate the disclosures contained in the audited financial statements for the most recent fiscal year 2014 as reported in the Company's Form 10-K have been omitted. The results of operations for the three and six month periods ended March 31, 2015 and 2014 are not necessarily indicative of the results to be expected for the full year. In the opinion of management, the consolidated financial statements include all adjustments, consisting of normal recurring adjustments, necessary to present fairly the Company's financial position, results of operations and cash flows. These statements should be read in conjunction with the consolidated financial statements and related notes which are part of the Company's Annual Report on Form 10-K for the year ended September 30, 2014. USE OF ESTIMATES The preparation of consolidated financial statements in conformity with accounting principles generally accepted in the United States of America, requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting periods. Actual results could differ from those estimates. CONCENTRATION OF CREDIT RISK One (1) customer made up 100% of the accounts receivable balance as of March 31, 2015 and September 30, 2014. One (1) customer made up 100% of the revenue during the three and six months ended March 31, 2014. There was no revenue during the three and six months ended March 31, 2015, respectively. 6 As of April 2014, the Company stopped receiving royalty revenue from the customer that made up the revenue concentration noted above due to the expiration of the related patent. The loss of this customer has materially and adversely affected the Company's consolidated financial position, results of operations and cash flows as the customer was the Company's primary source of revenue during recent years. NET INCOME (LOSS) PER SHARE Basic net income (loss) per share is calculated by dividing net income (loss) by the weighted average common shares outstanding during the period. Diluted net income (loss) per share reflects the potential dilution to basic net income (loss) per share that could occur upon conversion or exercise of securities, options or other such items to common shares using the treasury stock method, based upon the weighted average fair value of our common shares during the period. Series A convertible preferred stock totaling 2,763,699 shares have been included in the calculation of diluted net income (loss) per share for the three months ended March 31, 2015 NEW ACCOUNTING PRONOUNCEMENTS In May 2014, the FASB issued new accounting guidance regarding revenue recognition under GAAP. This new guidance will supersede nearly all existing revenue recognition guidance, and is effective for public entities for annual and interim periods beginning after December 31, 2016. Early adoption is not permitted. The Company is currently evaluating the impact of this new guidance on the Company's financial statements. In August 2014, the FASB issued Accounting Standards Update No. 2014-15, "Presentation of Financial Statements--Going Concern", which requires management to evaluate, at each annual and interim reporting period, whether there are conditions or events that raise substantial doubt about the entity's ability to continue as a going concern within one year after the date the financial statements are issued and provide related disclosures. ASU 2014-15 is effective for annual periods ending after December 15, 2016 and interim periods thereafter. Early application is permitted. Management is still in the process of assessing the impact of ASU 2014-15 on the Company's financial statements. In April 2015, the FASB issued Accounting Standard Update ("ASU") 2015-03 Simplifying the Presentation of Debt Issuance Costs. This update requires capitalized debt issuance costs to be classified as a reduction to the carrying value of debt rather than a deferred charge, as is currently required. This update will be effective for the Company for all annual and interim periods beginning after December 15, 2015 and is required to be adopted retroactively for all periods presented, and early adoption is permitted. The Company is currently evaluating the expected impact of this new accounting standard on its financial statements. The Financial Accounting Standards Board issues Accounting Standards Updates ("ASUs") to amend the authoritative literature in Accounting Standards Codification ("ASC"). There have been a number of ASUs to date that amend the original text of ASC. The Company believes those issued to date either (i) provide supplemental guidance, (ii) are technical corrections, (iii) are not applicable to the Company or (iv) are not expected to have a significant impact on the Company. 4. INVENTORIES As of March 31, 2015 and September 30, 2014, the Company's inventories were fully reserved. 5. DEBT MITIGATION PROGRAM The Company has significant liabilities that have been incurred due to continued operating losses and the acquisition of Smart World in 2006. In order to attract potential capital, the Company has conducted analysis on past due obligations to creditors. We determined that the statute of limitations for certain of our creditors to enforce collection of any amounts they might be owed has now elapsed. Based on our determinations and findings, fiscal 2014, we eliminated $635,903 in creditor liabilities which were all previously included in accounts payable and notes payable in the accompanying balance sheets. There were no such eliminations during the six months ended March 31, 2015. 7 The Company will continue to conduct this analysis going forward and eliminate obligations when such obligations are no longer enforceable based on applicable law. 6. ACCRUED EXPENSES Accrued expenses consist of the following at: March 31, September 30, 2015 2014 ---------- ---------- Interest $ 364,947 $ 351,659 Interest to related parties 257,536 238,400 Compensation and related 3,169,779 2,943,249 ---------- ---------- $3,792,262 $3,533,308 ========== ========== 7. NOTES PAYABLES AND RELATED PARTY TRANSACTIONS RELATED PARTY TRANSACTIONS During the three months ended March 31, 2015, the Company's secretary, Ms. Visco loaned the Company an additional $17,000 for working capital. The previous note for $964,842 was amended to increase the principal due to $981,842. The principal is due in December 2015 and interest is payable monthly, at prime rate. The note is currently in default for non-payment of interest. 8. COMMON STOCK There were no stock issuances during the three and six months ended March 31, 2015 and 2014. 9. LITIGATION On or about September 21, 2007, Stockhausen, Inc. ("Stockhausen") filed a Complaint in the United States District Court, for the Middle District of North Carolina, against us seeking damages. The parties entered into a settlement agreement on June 2, 2010. Under the settlement agreement, we agreed to pay Stockhausen $250,000 on or before June 23, 2010 as a compromise to Stockhausen's claims that currently total $603,921. We further agreed that we would consent to the entry of a Judgment against us in favor of Stockhausen in the amount of $603,921 if we failed to make complete and timely payment as agreed. The company was unable to make the agreed upon payment and on July 8, 2010 Stockhausen entered a judgment for the above stated amount against the Company. On or about October 4, 2007, Raymond J. Nielsen and Cheryl K. Nielsen (collectively, "Plaintiffs"), filed a Complaint in the Circuit Court in the Sixth Judicial District of Pasco County, Florida, against us and Smart World (collectively "Defendants") seeking damages, declaratory, and injunctive relief. Plaintiffs allege that Defendants failed to pay interest when due on the Convertible Debenture from Defendants to Plaintiffs and, thus, the entire amount of the Convertible Debenture is accelerated and Plaintiffs are seeking a judgment in the amount of $1,500,000 plus interest. On December 29, 2009, the matter was settled for $400,000 and the Company had 60 days in which to remit the amount or a judgment in the entire amount claimed will be entered against us. The Company was not able to meet the terms of the settlement. On February 21, 2011, we agreed to pay interest on the settlement amount at 4% per annum. To the best knowledge of our management, there are no other significant legal proceedings pending against us. 9. SUBSEQUENT EVENTS On April 2, 2015 Ms. Visco loaned the Company an additional $5,000. The terms of the loan as similar to those outlined in Note 7. 8 ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS The following discussion and analysis should be read in conjunction with our financial statements, including the notes thereto, appearing elsewhere in this Report. FORWARD-LOOKING STATEMENTS The following information contains certain forward-looking statements. Forward-looking statements are statements that estimate the happening of future events and are not based on historical fact. Forward-looking statements may be identified by the use of forward-looking terminology, such as "may," "could," "expect," "estimate," "anticipate," "plan," "predict," "probable," "possible," "should," "continue," or similar terms, variations of those terms or the negative of those terms. The forward-looking statements specified in the following information have been compiled by our management on the basis of assumptions made by management and considered by management to be reasonable. Our future operating results, however, are impossible to predict and no representation, guaranty, or warranty is to be inferred from those forward-looking statements. OVERVIEW We market cutting-edge technology that decreases the need for water and improves the soil in the "Green Industry" consisting of agriculture, turf and horticulture. RESULTS OF OPERATIONS The following table sets forth, for the periods indicated, our selected financial information: Six Months Six Months Ended Ended March 31, 2015 March 31, 2014 -------------- -------------- (Unaudited) (Unaudited) STATEMENT OF OPERATIONS DATA: Revenue $ -- $ 26,993 Net income (loss) (279,638) 357,169 Net income (loss) per share $ (0.00) $ 0.01 Net income (loss) per share, diluted $ (0.00) $ 0.01 March 31, 2015 September 30, 2014 -------------- ------------------ (Unaudited) BALANCE SHEET DATA: Current Assets $ 5,569 $ 5,236 Current liabilities 8,060,082 7,780,111 Accumulated deficit $(29,336,253) $(29,056,615) SIX MONTHS ENDED MARCH 31, 2015 COMPARED TO SIX MONTHS ENDED MARCH 31, 2014 REVENUES Revenues for the six months ended March 31, 2015 were $0 compared to $26,993 for the six months ended March 31, 2014, a decrease of 100%. This decrease in revenue is a direct a result of the expiration of a patent in April 2014 for which royalties were generated in the prior year but not the current year. In addition, there have been no product sales during the current fiscal year. Lack of funds reduces our efforts in sales and marketing. COST OF SALES Cost of goods sold decreased to $1,650 for the six months ended March 31, 2015 from $3,270, for the six months ended March 31, 2014. Costs of goods sold are primarily related to storage fees incurred to store our remaining inventory, which has been fully reserved as of September 30, 2014. The Company incurs these costs even if no product revenue is realized. 9 OPERATING EXPENSES Operating expenses decreased 6.0% to $243,725 from $259,187 for the six month period ended March 31, 2015 and 2014, respectively. This decrease in operating expenses was a result of decreased operations. Our general and administrative expenses decreased to $243,725 for the six months ended March 31, 2015 from $248,700 for the six months ended March 31, 2014; however during the six months ended March 31, 2015 there were no sales and marketing expenses or amortization of intangible assets compared to $125 and $10,362 during the six months ended March 31, 2014. NET LOSS We experienced net loss from operations of $279,638 for the six months ended March 31, 2015 as compared to net income of $357,169 for the six months ended March 31, 2014. The difference in the six months ended on March 31, 2014 was primarily a result of the gain realized in the amount of $635,903 by the extinguishment of debt. As part of our debt mitigation program, we reviewed our long outstanding liabilities for among other things, the expiration of the statute of limitations for creditors to make claims on amounts owed. The analysis was based on applicable law in the state where the liability originated. There were no such gains recognized during the six months ended March 31, 2015. The Company will continue to analyze past due payables in future periods. LIQUIDITY AND CAPITAL RESOURCES Cash and cash equivalents totaled $1,690 and $3,157 at March 31, 2015 and September 30, 2014, respectively. Net cash used in operating activities was $23,467 for the period ended March 31, 2015 compared to $35,884 during the period ended March 31, 2014. Net cash provided by financing activities was $22,000 for the period ended March 31, 2015 compared to $35,000 for the comparable period ended March 31, 2014. We have historically relied upon one of our officers and significant shareholders to provide cash to meet short term operating cash requirements. During the six months ended March 31, 2015, the Company's secretary, Ms. Visco loaned the Company an additional $22,000 for working capital. The previous note for $964,842 was amended to increase the principal due to $981,842. Interest expense for the six months ended March 31, 2015 and 2014 was $34,263 and $43,270, respectively. We have a working capital deficit $8,054,513 as of March 31, 2015 compared to working capital deficit of $7,774,875 as of September 30, 2014. Our increase in current liabilities is directly related to additional accrual for salaries and interest. As shown in the accompanying financial statements, we have incurred an accumulated deficit of $29,336,253 and a working capital deficit of approximately $8,054,513 as of March 31, 2015. Our ability to continue as a going concern is dependent on obtaining additional capital and financing and operating at a profitable level. We intend to seek additional capital either through debt or equity offerings and to increase sales volume and operating margins to achieve profitability. Our working capital and other capital requirements during the next fiscal year and thereafter will vary based on the sales revenue generated. We will consider both the public and private sale of securities and/or debt instruments for expansion of our operations if such expansion would benefit our overall growth and income objectives. Should sales growth not materialize, we may look to these public and private sources of financing. There can be no assurance, however, that we can obtain sufficient capital on acceptable terms, if at all. Under such conditions, failure to obtain such capital likely would at a minimum negatively impact our ability to timely meet our business objectives. Our auditors issued an explanatory paragraph regarding substantial doubt about the Company's ability to continue as a going concern in our most recent 10-K for the year ended September 30, 2014. 10 ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK Not applicable ITEM 4. CONTROLS AND PROCEDURES We maintain disclosure controls and procedures that are designed to provide reasonable assurance that information required to be disclosed in our Exchange Act reports is recorded, processed, summarized and reported within the time periods specified in the SEC's rules and forms and that such information is accumulated and communicated to our management, including our Chief Executive Officer, as appropriate, to allow timely decisions regarding required disclosure. In designing and evaluating the disclosure controls and procedures, management recognizes that any controls and procures, no matter how well designed and operated, can provide only reasonable assurance of achieving the desired control objectives and in reaching a reasonable level of assurance management necessarily was required to apply its judgment in evaluating the cost benefit relationship of possible controls and procedures. Our management has evaluated, under the supervision and with the participation of our chief executive officer and chief financial officer ("Certifying Officers"), the effectiveness of our disclosure controls and procedures as of the end of the period covered by this report pursuant to Rule 13a-15(b) under the Securities Exchange Act of 1934 (the "Exchange Act"). Based on that evaluation, our Certifying Officers have concluded that, as of the end of the period covered by this report, our disclosure controls and procedures are effective in ensuring that information required to be disclosed in our Exchange Act reports is (1) recorded, processed, summarized and reported within the time periods specified in the Securities and Exchange Commission's rules and forms, and (2) accumulated and communicated to our management, including Certifying Officers, as appropriate to allow timely decisions regarding required disclosure. There has been no other change in our internal controls over financial reporting during our most recent fiscal quarter that has materially affected, or is reasonably likely to materially affect, our internal controls over financial reporting. ITEM 4T. CONTROLS AND PROCEDURES Not applicable PART II - OTHER INFORMATION ITEM 1. LEGAL PROCEEDINGS On or about September 21, 2007, Stockhausen, Inc. ("Stockhausen") filed a Complaint in the United States District Court, for the Middle District of North Carolina, against us seeking damages. The parties entered into a settlement agreement on June 2, 2010. Under the settlement agreement, we agreed to pay Stockhausen $250,000 on or before June 23, 2010 as a compromise to Stockhausen's claims that currently total $603,921. We further agreed that we would consent to the entry of a Judgment against us in favor of Stockhausen in the amount of $603,921 if we failed to make complete and timely payment as agreed. The company was unable to make the agreed upon payment, and on July 8, 2010, Stockhausen entered a judgment for the above stated amount against the company. On or about October 4, 2007, Raymond J. Nielsen and Cheryl K. Nielsen (collectively, "Plaintiffs"), filed a Complaint in the Circuit Court in the Sixth Judicial District of Pasco County, Florida, against us and Smart World (collectively "Defendants") seeking damages, declaratory, and injunctive relief. Plaintiffs allege that Defendants failed to pay interest when due on the Convertible Debenture from Defendants to Plaintiffs, and, thus, the entire amount of the Convertible Debenture is accelerated and Plaintiffs are seeking a judgment in the amount of $1,500,000 plus interest. On March 29, 2009, the matter was settled for $400,000 and the Company had 60 days in which to remit the amount or a judgment in the entire amount claimed will be entered against us. The Company was not able to meet the terms of the settlement. To the best knowledge of our management, there are no other legal proceedings pending against us. 11 ITEM 1A. RISK FACTORS Not applicable. ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS None ITEM 3. DEFAULTS UPON SENIOR SECURITIES None. ITEM 4. MINE SAFETY DISCLOSURES None. ITEM 5. OTHER INFORMATION None. ITEM 6. EXHIBITS The following Exhibits are filed herein: No. Title --- ----- 31.1 Certification of Chief Executive Officer Pursuant to the Securities Exchange Act of 1934, Rules 13a-14 and 15d-14, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 31.2 Certification of Chief Financial Officer Pursuant to the Securities Exchange Act of 1934, Rules 13a-14 and 15d-14, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 32 Certification Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 101 Interactive data files pursuant to Rule 405 of Regulation S-T SIGNATURES In accordance with the Exchange Act, the registrant caused this report to be signed on its behalf by the undersigned, duly authorized. DATED: May 19, 2015 AMERICAN SOIL TECHNOLOGIES, INC. By: /s/ Carl P. Ranno ------------------------------------- Carl P. Ranno Its: President, Chief Executive Officer, Chief Financial Officer (Principal Executive Officer, Principal Financial Officer and Principal Accounting Officer) 12

AMERICAN SOIL TECHNOLOGIES INC 10-Q